What to Watch: How Big Brands Will Respond

Beverage World:

By Bill Anderson

We’re living in an era of small brands. Even tiny brands are getting a disproportionate share of mind not only from consumers, but from distributors and retailers. We’re also living in a time of extreme innovation and change. As MillerCoors CEO Tom Long said recently at his distributors convention, “Disruption and fragmentation seem to be the new normal in the beer business.”

It would be easy to think in this environment that the market share of mega brands and their owners will only continue to sink. But the big brands will respond. While it is possible some big brands will go into freefall, it’s also clear that other top suppliers will respond adeptly in their competition against small brands. For those suppliers, it will take adapting to this new world with creativity, nimbleness and speed. In other words, big brands will have to act small.

On the same day in February, two major suppliers gave us examples of how they are able to innovate and respond to the power of small brands. Anheuser-Busch Inbev announced that it was buying Blue Point, a relatively small craft brewery likely to be part of a regional acquisition strategy by ABI to bring attractive crafts to their distributor network. Coke also announced that it had purchased 10% of Green Mountain as a way to capitalize on the opportunity to extend the home consumption of their core brands through Green Mountain cold-drink pods.

Big suppliers are also showing how they will and can play local. Pernod Ricard recently announced their Our/Vodka platform which provides micro-grant like investments for entrepreneurs (from outside the industry) to manufacture local vodkas using locally-sourced ingredients. Our/Detroit is already launched, and Our/Seattle and Our/New York are in the works for this fall.

But not all steps by big brands will be so positive. It’s not unlikely that some big brands, to avoid further steep declines, may significantly drop pricing. Others may also take more extreme measures to control more of their distribution network or bite into their distributors’ margins.

We’re in an era of small brands, but the most interesting trends to watch may come from how big brands will respond. The winners will be those that can act small in an authentic way.